How much are our lives worth and why do we need to insure them? Financial adviser Richard Gough explains why you do.

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The short answer is yes; there are very few occasions where someone genuinely does not need life cover.

Life cover is relatively inexpensive for the benefit provided and should be the first thing anyone does once they have people financially dependent on them.

The reality is of course that we will all die, and unfortunately some of us will die sooner than what is deemed a normal life expectancy. We cannot plan for the exact day we die, but we can plan to avoid the severe financial hardship which can occur as a result of untimely death.

Working the numbers

There are obvious things to look at, such as ensuring any mortgage is fully covered along with any loans or debts. This level of cover is then relatively straightforward enough to calculate and put in place.

The next area to consider is that of the longer term financial impact on your family. How much would they need to meet their general living expenses? What about the cost of raising children and the associated education costs? Even if you don't choose private school, universities now charge fees which will only get higher.

It's not just the main breadwinner who needs to be covered. The death of a non-working spouse can be equally financially difficult. Who would look after the children? Is there a need for child care/day care nursery? Would these costs be affordable without some form of life cover?

These lifestyle costs are more difficult to quantify and you need to give it some thought. Financial planners can help here with detailed cash flow forecasts to calculate the level of cover required and advise you accordingly.

Having worked out how much cover is needed and the term it should run for, there are other details to look out for. One important concerns placing the policy in trust. This is important in order to ensure any benefit is paid out quickly and to the right people. All too often delays in payment – often many months – occur as a result of requiring probate – an issue that can easily be avoided if the life cover policy is set up correctly in the first place.